Question

A real estate agent spends $1,500 on advertising for three months to sell an average house. if the house sells in three months, the agent earns $9,000. otherwise, he loses the listing and earns nothing. if there is a 40% chance that the house will sell in three months, what is the expected revenue for the real estate agent?

Answer 1

$2100.

Explanation:

We have been given that a real estate agent spends $1,500 on advertising for three months to sell an average house. This means that cost of advertisement is $1500.

We are also told that if he house sells in three months, the agent earns $9,000 and there is a 40% chance that he will sell the house in three months.

To find the expected revenue first of all let us find 40% of $9000.

`\text{The profit from selling the house in 3 months}=(40)/(100)* \$9000`

`\text{The profit from selling the house in 3 months}=0.40* \$9000`

`\text{The profit from selling the house in 3 months}=\$3600`

Now let us subtract the amount spent on advertising from the profit earned by agent to find the expected revenue.

`\text{The expected revenue for the real estate agent}=\$3600-\$1500`

`\text{The expected revenue for the real estate agent}=\$2100`

Therefore, the expected revenue for the real estate agent is $2100, is he sells the house in 3 months.